Correlation Between Verint Systems and Shopify

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Can any of the company-specific risk be diversified away by investing in both Verint Systems and Shopify at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Verint Systems and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verint Systems and Shopify, you can compare the effects of market volatilities on Verint Systems and Shopify and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Verint Systems with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verint Systems and Shopify.

Diversification Opportunities for Verint Systems and Shopify

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Verint and Shopify is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Verint Systems and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Verint Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Verint Systems are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Verint Systems i.e., Verint Systems and Shopify go up and down completely randomly.

Pair Corralation between Verint Systems and Shopify

Given the investment horizon of 90 days Verint Systems is expected to under-perform the Shopify. But the stock apears to be less risky and, when comparing its historical volatility, Verint Systems is 1.72 times less risky than Shopify. The stock trades about -0.08 of its potential returns per unit of risk. The Shopify is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,663  in Shopify on December 29, 2023 and sell it today you would earn a total of  199.00  from holding Shopify or generate 2.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Verint Systems  vs.  Shopify

 Performance 
       Timeline  
Verint Systems 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Verint Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Verint Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.
Shopify 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Shopify is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Verint Systems and Shopify Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verint Systems and Shopify

The main advantage of trading using opposite Verint Systems and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verint Systems position performs unexpectedly, Shopify can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shopify will offset losses from the drop in Shopify's long position.
The idea behind Verint Systems and Shopify pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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